Cato expert Mark A. Calabria suggests a simple reform that would make decisions by the Federal Reserve Board more responsive to America’s different regional economies – include at least one board member from each Federal Reserve region.

Congress imposed a “geographic diversity” requirement upon the Fed for good reason. Regions of the country do not move together. Nevada’s 11.7 percent unemployment rate, for example, is significantly above South Dakota’s 4.3 percent. If the Fed lacks a wide range of voices, then its policies are not likely to reflect the economic differences across our country. An interest rate policy that might be appropriate for New York City, and its financial sector, might not be appropriate for industrial Ohio. Just the fact that only one current Fed governor, Janet Yellen from San Francisco, is from west of the Mississippi raises questions as to the legitimacy of Fed decision-making.

Calabria points out that another benefit of diversifying board membership is that doing so follows the law. The Federal Reserve Act requires that, regarding members of the board, “not more than one of whom shall be selected from any one Federal Reserve district,” so that those making monetary policy decisions “shall have due regard to a fair representation of… geographical divisions of the country.”

Unsurprisingly, this easy to apply standard was recently violated when President Barack Obama nominated and the liberal Senate confirmed new members from Massachusetts and Maryland, even though two current members also hail from those states. Combine this with the New York Fed’s distinction as the only district with a permanent vote, and there is a regional – and arguably illegal – bias in favor of the Northeast.

Every region of the country should be represented equally when the Fed Governors decide how much money to print and where to peg the interest rate. To be sure, it would be better if the free market was deciding these issues, but that’s not the reality of the 21st century’s administrative state. With that in mind, perhaps the cry could be, “No manipulation without representation!”

Ashton asks me if I know of businesses eager to expand. The answer is no. Or, rather, “Bleep no!” And today’s news about the dollar falling even farther will worry them even more. Obama regulatory policy, Obama/Reid fiscal policy, and Bernanke’s recklessly inflationary monetary policy all have given businesses the willies. Now comes word that consumer confidence, already low, has fallen even more precipitously. Nothing will give businesses confidence until the leftists in the executive branch are gone.

That said, I agree wholeheartedly with the main thrust of Troy’s excellent column about tax reform — bold reform of individual income taxes is desperately needed, and Mitt Romney’s failure to propose such a thing is another horrendous mark against him — but I disagree that individual tax reform should come first in this horrid economy, and I disagree that only four people still have a chance to win the Republican nomination. Individual tax reform, no matter how designed, will take tremendous time and effort to work through the legislative process, with all sorts of trade-offs along the way. And in this economy, the problem isn’t really coming from individuals, it’s coming from a failure of corporations to re-invest the mountains of cash on which they now sit.

All of which is to say that the best way to cut the Gordian knot, for the current economy, is to completely eliminate corporate income taxes in one fell swoop. Almost as good is to cut them in half, and eliminate them entirely for manufacturers, as Rick Santorum would do. Which leads us to the failure to mention Santorum as a real contender for the nomination. A word to the wise: Check out his grassroots organization in Iowa. It’s the single best one to date.

Sure, voters are focused on how their taxes, not corporate taxes, will change. That’s why 9-9-9 proved so sexy. But they care about jobs as well, and if the sale is made right, they’ll see that the good jobs will come fastest from corporate tax reform, not individual tax reform. All Santorum need add when he’s discussing his tax proposal is that he has always supported various versions of the flat tax, that the idea isn’t anything new, and that so many off-the-shelf flat-tax plans have been out there for a quarter-century that the exact details don’t matter. He’s for a flatter, simpler individual tax code, period. But you don’t worry about income taxes if you don’t have a job, and a one-stop corporate-tax slash is the best way to achieve that.

When I wrote last week on the coming stagflation, I didn’t know that by formerly used official US inflation measures, current inflation is running at 10%. Niall Ferguson says it is. His terrific column is here.

This Ferguson paragraph mirrors one of mine from last week:

To ordinary Americans, however, it’s not the online price of an iPad that matters; it’s prices of food on the shelf and gasoline at the pump. These, after all, are the costs they encounter most frequently. And with average gas prices hitting $3.88 a gallon last week, filling up is now twice as painful as when President Obama took office.

(From my column last week: “The Fed economists may discount food and gasoline prices as unstable indicators that aren’t part of “core” inflation, but for most Americans food and gas cost hikes are the very definition of inflation. These are the things they pay for every day; they are the items closest to their psyches. Those gas prices on the big billboards at every filling station have an outsized effect on American psychology.”)

Here’s the Ferguson bit about how the inflation measure has changed:

And the reason the CPI is losing credibility is that, as economist John Williams tirelessly points out, it’s a bogus index. The way inflation is calculated by the Bureau of Labor Statistics has been “improved” 24 times since 1978. If the old methods were still used, the CPI would actually be 10 percent. Yes, folks, double-digit inflation is back. Pretty soon you’ll be able to figure out the real inflation rate just by moving the decimal point in the core CPI one place to the right.

As we prepare for the beginning of the era of the Federal Reserve as PR machine, we can anticipate a glut of federal statistics hand-picked to convince the public that the growing evidence of inflation is psychosomatic. Of course, it helps that the Fed’s core measure of inflation excludes such basic staples as food and energy. But as Jeffery Lord points out at the American Spectator, the main street indices tell a sharply different story than the Wall Street rationalizations:

Gasoline prices have increased from the $3 range to the $4 range in just one year, we’re approaching all new record prices set in 2008 even though it’s not even summer driving season yet. But ignore higher gas and food prices, America. They only matter if you actually drive or eat. Federal Reserve Vice Chair Janet Yellen says it’s all “transitory,” and we need to keep the “stimulative” inflationary monetary spigots open because it “continues to be appropriate.”

Even the European Central Bank is raising interest rates in an attempt to avert inflation. Of course, there isn’t an Obama reelection campaign to sustain over there.

In this week’s Freedom Minute, CFIF’s Renee Giachino discusses the national debt crisis, Congress’ addiction to excessive spending and the Democrat’s budget plan. Giachino warns that without serious and immediate action to right the nation’s fiscal ship, America is destined to a future of higher taxes, greater inflation and a lower standard of living.

In a break with tradition, Federal Reserve Chairman Ben Bernanke will hold public news conference four times a year, in the U.S. central bank’s latest move to boost transparency and improve communications after its policies came under attack.

Earth to Ben: policies like quantitative easing (i.e. printing more money) come under attack because they devalue the dollar through inflation. Explaining that reality – or denying it – in more detail won’t make the policy more attractive. If anything, it will doom any chance of getting re-nominated for your position.

In a November commentary, I warned that Ben Bernanke’s expansionary monetary policy threatened to erode the value of the dollar and weaken the American economy. Now the leading mind of the House GOP caucus is saying the same thing to the Fed Chairman’s face. With Bernanke appearing before the House Budget Committee earlier today, newly minted Chairman Paul Ryan of Wisconsin laid the consequences of “quantitative easing” on the line:

“There is nothing more insidious that a country can do to its citizens than debase its currency,” Ryan told Bernanke. “Chairman Bernanke: We know you know this. We know that you’re focused and concerned about this. The Fed’s exit strategy and future policy – it will determine how this ends.”

Ryan said he believed a “course correction here in Washington is sorely needed.”

“Endless borrowing is not a strategy,” he said. “My concern is that the costs of the Fed’s current monetary policy – the money creation and massive balance sheet expansion – will come to outweigh the perceived short-term benefits.”

“It is hard to overstate the consequences of getting this wrong. The dollar is the world’s reserve currency and this has given us tremendous benefits in the global economy,” Ryan said.

As usual, Paul Ryan is right. Unfortunately, there’s little that can be done from the outside. The Fed operates free of traditional rules of transparency (one of the reasons the push to audit its books has gained so much traction) and it works on the basis of a delusional proposition that it can be an engine of economic stimulus at the same time that it maintains the dollar as a stable store of value (a proposition that Ryan has rightly called into question). There’s still a lot of work to be done to rationalize American monetary policy. But it’s at least heartening to know that we’ve literally got our best man on it.

Further proof that the Beltway Keynesians have taken us down the economic rabbit hole: it’s now falling to Europeans to warn us that inflation and stimulus are tanking the dollar. Consider the following from the Financial Times:

Increasing expectations the Federal Reserve will pump more money into the US economy next month under a policy known as quantitative easing sent the dollar to new lows against the Chinese renminbi, Swiss franc and Australian dollar. It dropped to a 15-year low against the yen and an eight-month low against the euro …

A senior European policy-maker, who asked not to be named, said a further aggressive round of monetary easing by the US Federal Reserve would be “irresponsible” as it made US exports more competitive at the expense of its rivals…

Russia’s finance minister Alexei Kudrin, in a meeting with European Union officials, blamed the US – and others – for global currency instability.

He said one reason for exchange rate turmoil “is the stimulating monetary policy of some developed countries, above all the United States, which are trying to solve their structural problems in this way”.

The entire justification for the creation of the Federal Reserve was to ensure that monetary policy would be insulated from political pressure. If Ben Bernanke chooses to act as a handmaiden for the profligacy of the Obama Administration, then he deserves to be cleaning out his desk just as much as the president.

With the Federal Reserve announcing it will increase the supply of paper money (i.e. dollars), it is once again time to consider the merits of (re)adopting the Gold Standard to help regulate the value of our nation’s currency. Gold Standard 2012, a project of the American Principles Project, has a helpful video:

The government can’t manage to control the laws of economics like it used to.

No surprise here, but according to a new study released by the non-partisan Center for Medicare and Medicaid Studies, the House health care bill will increase health care costs by $289 billion in the next ten years.

As much as the White House talked about “bending the health care cost curve” downward, the House health care bill, H.R.3962, does the exact opposite.

For some reason the Administration can’t understand that more government spending on health care without commensurate gains in supply leads to health care inflation, driving up costs for all consumers.

By calendar year 2019, the mandates, coupled with the Medicaid expansion, would reduce the number of uninsured from 57 million, as projected under current law, to an estimated 23 million under H.R. 3962.

The estimated effects of H.R. 3962 on overall national health expenditures (NHE) are shown in table 5. In aggregate, we estimate that for calendar years 2010 through 2019 NHE would increase by $289 billion, or 0.8 percent, over the updated baseline projection that was released on June 29, 2009… The NHE share of GDP is projected to be 21.1 percent in 2019, compared to 20.8 percent under current law.

Public spending would increase under H.R. 3962 as a result of the expansion of the Medicaid program and other Medicaid changes, less the net Medicare savings under the bill. Private expenditures would be higher as well…